PrefBlog

Brookfield Office Properties Inc. has announced:

that after having taken into account all election notices following the December 17, 2018 conversion deadline for the Class AAA Preference Shares, Series T (the “Series T Shares”) (TSX: BPO.PR.T) tendered for conversion into Class AAA Preference Shares, Series U (the “Series U Shares”), the holders of Series T Shares are not entitled to convert their Series T Shares into Series U Shares. There were 65,139 Series T Shares tendered for conversion, which is less than the 1,000,000 shares required to give effect to conversions into Series U Shares.

The Series T Shares will pay on a quarterly basis, for the five-year period beginning on January 1, 2019, as and when declared by the board of directors of Brookfield, a fixed dividend based on an annual dividend rate of 5.383% per annum (C$0.336438 per share per quarter).

It will be recalled that BPO.PR.T will reset at 5.383% effective January 1, 2019.

BPO.PR.T is a FixedReset, 4.60%+316, that commenced trading 2012-9-13 after being announced 2012-9-5. It is tracked by HIMIPref™, but relegated to the Scraps – FixedReset Discount index on credit concerns.

I recommended against conversion.

Standard & Poor’s has announced:

• •On Dec. 27, 2019, S&P Global Ratings revised its outlook on Innergex Renewable Energy Inc. to negative from stable, and affirmed its ratings, including its ‘BBB-‘ long-term issuer credit rating, on Innergex.
• •We expect Innergex to have weak financial metrics in 2018 due to the timing and financing of acquisitions, although it expects these to improve in 2019.
• •Innergex is issuing nonrecourse debt at the asset level and intends to sell its HS Orka geothermal assets in Iceland, using proceeds to reduce parent-level debt; however, this introduces incremental execution risk.
• •If the debt reduction strategy is delayed or the amount is lower than expected, financial metrics might not recover to the 24%-26% range, which could result in a downgrade.

…
. Innergex has completed a number of acquisitions in 2018 that have increased leverage both through acquired debt and development financing at the corporate level. Although the company expects to de-lever in 2019 through asset level financing and asset sales, we believe that there is execution risk with this strategy. Our financial forecasts project Innergex moving back into the stable range of 24%-26% funds from operations (FFO)-to-debt in 2019. However, they are predicated on completing asset sales, which raises significant execution risk and reflects our outlook revision to negative from stable.

The negative outlook reflects significantly lower FFO-to-debt ratios of about 18% in 2018, compared with expectations of 23% at the ‘BBB-‘ level. S&P Global Ratings’ expects Innergex to face execution risk with its strategy of improving forecast financial metrics through asset level financing and asset sales, and the outlook reflects the deteriorating financial performance. S&P Global Ratings expects FFO-to-debt to recover to the 24%-26% range in 2019 and 2020.

A downgrade could happen if the FFO-to-debt ratio does not recover and remains above 23% over our two-year outlook period. This could result from Innergex’s inability to execute on its asset sale plan that it would use to reduce nonrecourse debt. In addition, given the limited cushion in financial metrics above the 23% FFO-to-debt downgrade trigger, lower-than-expected distributions from its subsidiary assets or an increase in nonrecourse debt used to finance development or acquisition opportunities could lead to a downgrade.

An outlook revision to stable could occur if Innergex deleverages, by paying down bridge and revolving credit facility with asset sales, such that FFO-to-debt metrics return to, and stay in, the 24%-26% range.

Affected issues are INE.PR.A and INE.PR.C.

Algonquin Power & Utilities Corp. has announced:

that none of its outstanding 4,800,000 Cumulative 5-Year Rate Reset Preferred Shares, Series A (the “Series A Preferred Shares”) will be converted on December 31, 2018 into Cumulative Floating Rate Preferred Shares, Series B (the “Series B Preferred Shares”) of the Company. During the conversion notice period which ran from December 3, 2018 to December 17, 2018, less than 1,000,000 Series A Preferred Shares were tendered for conversion into Series B Preferred Shares. As per the terms and conditions of the Series A Preferred Shares described in the short form prospectus dated November 2, 2012 relating to the issuance of Series A Preferred Shares, since there would remain outstanding on December 31, 2018, after having taken into account all Series A Preferred Shares tendered for conversion into Series B Preferred Shares, less than 1,000,000 Series B Preferred Shares, holders of Series A Preferred Shares who tendered their Series A Preferred Shares for conversion will not be entitled to convert their Series A Preferred Shares into Series B Preferred Shares. As a result, Series B Preferred Shares will not be issued at this time.

All dollar amounts referenced herein are in U.S. dollars unless otherwise noted.

It will be recalled that AQN.PR.A will reset at 5.162% effective December 31, 2018.

AQN.PR.A is a FixedReset, 4.50%+294, that commenced trading 2012-11-9 after being announced 2012-10-25. The 2018-11-28 notice of extension was reported on PrefBlog. The issue is tracked by HIMIPref™, but relegated to the Scraps – FixedReset Discount index on credit concerns.

I recommended against conversion.